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An analyst's bearish take on Tesla and reduced Model S and X production hours may have some investors worried.

What happened

Shares of Tesla(NASDAQ:TSLA) took a hit on Wednesday, falling as much as 5.8%. Shares finished the trading day down about 3.8%.

The stock's decline was probably sparked by a combination of an analyst downgrade on the stock and news that Tesla is cutting its worker hours for Model S and X production.

Tesla vehicle production. Image source: author.

So what

"Given 2019 deliveries are likely to be close to fourth-quarter 2018 run-rate, but with a price/mix headwind, third-quarter 2018 may have been peak profitability this decade," said RBC Capital Markets analyst Joseph Spak on Wednesday (as reported by Bloomberg). Citing these concerns for the company's profitability outlook along with a lofty valuation for the stock, Spak downgraded his rating for the stock from "sector perform" to "underperform." In addition, the analyst set a 12-month price target for the stock of $245, down from $290 previously.

On a separate note, the company is reportedly eliminating some Model S and X production hours as part of its recent announcement of a 7% reduction to its full-time employee workforce.

Tesla is providing this comment about the reduced Model S and X production hours to the media:

We recently announced that we are no longer taking orders for the 75 kWh version of Model S and X in order to streamline production and provide even more differentiation with Model 3. As a result of this change and because of improving efficiencies in our production lines, we have reduced Model S and X production hours accordingly. At the same time, these changes, along with continuing improvements, give us the flexibility to increase our production capacity in the future as needed. We'll be providing more details on our earnings call next week.

Now what

Investors will probably get more context next week on both management's outlook for profitability and what reduced production hours for Model S and X mean for the two vehicles. Tesla reports its fourth-quarter results on Jan. 30.

Author

Daniel Sparks is a senior technology specialist at The Motley Fool. He served in the U.S. Army on active duty and graduated with an MBA from Colorado State University. Follow him on Twitter for updates.
Follow @danielsparks